The Department of Insurance audit stems from State Fund's agreements with associations to market workers' compensation insurance policies that prompted some to allege conflicts of interest because leaders of two groups sat on the insurer's five-member board.

Since November 2006, those two board members have resigned, and the insurer's president and vice president for group sales were fired.

State Fund writes about a quarter of workers' compensation insurance policies in California (California Healthline, 12/11).

In a statement reacting to the audit, the governor said it was "outrageous that the former State Fund management would recklessly spend dollars."

Schwarzenegger said new State Fund officials are taking steps to correct the problems cited in the audit. He added that he will work with lawmakers and Insurance Commissioner Steve Poizner (D) to help reform State Fund's practices (Sacramento Bee, 12/12).

Editorial, Opinion Piece

Summaries of an editorial and opinion piece regarding the State Fund audit appear below.

Dan Walters, Sacramento Bee: "Given the multibillion-dollar stakes in workers' compensation ... the audit is an important document unto itself," Dan Walters writes in his Bee column. "There is, however, another dimension to the scandal: It's not an isolated case," Walters writes, citing the California Institute of Regenerative Medicine and the First 5 California Children and Families Commission as other examples of state-backed entities with problematic governance structures (Walters, Sacramento Bee, 12/12).

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